10-QPeriod: Q2 FY2004

DANAHER CORP /DE/ Quarterly Report for Q2 Ended Apr 2, 2004

Filed April 22, 2004For Securities:DHR

Summary

Danaher Corporation's first quarter 2004 report (ending April 2, 2004) highlights robust sales growth driven by both existing businesses and strategic acquisitions, particularly in the Process/Environmental Controls segment. The company reported a significant increase in net earnings and earnings per share compared to the prior year's first quarter. Danaher's acquisition strategy remains active, with substantial investment in new businesses, including the significant acquisition of Radiometer S/S and pending acquisition of KaVo, which are bolstering the new Medical Technology platform. The company's financial health appears strong, with a notable increase in operating cash flow, despite significant cash outflows for acquisitions. Danaher's management expresses optimism about continued growth, while acknowledging potential risks from competition, currency fluctuations, and economic uncertainties. The company continues to leverage its Danaher Business System (DBS) to drive operational improvements and cost efficiencies across its diverse segments.

Key Highlights

  • 1Total sales increased by approximately 29% to $1.54 billion for the first quarter of 2004 compared to the prior year, driven by 12.5% organic growth, 12% from acquisitions, and 4.5% from favorable currency translation.
  • 2Net earnings rose significantly to $145.2 million, or $0.94 per basic share ($0.90 diluted), compared to $103.1 million, or $0.67 per basic share ($0.65 diluted), in the first quarter of 2003.
  • 3The Process/Environmental Controls segment saw a 32% increase in sales, driven by strong performance in environmental, motion, and electronic test businesses, as well as significant contributions from recent acquisitions like Radiometer.
  • 4The Tools and Components segment also experienced robust growth, with an 18% increase in sales, primarily driven by hand tool sales in industrial markets and niche businesses.
  • 5Danaher actively pursued its acquisition strategy, completing four acquisitions in the quarter for approximately $814 million, including the significant purchase of Radiometer S/A for $677 million. A pending acquisition of KaVo for approximately $425 million was also announced.
  • 6Operating cash flow increased by 17.5% to $251.9 million, supported by earnings growth and improved working capital management, despite significant cash used in investing activities for acquisitions.
  • 7Goodwill increased substantially by $626 million during the quarter due to acquisitions, bringing the total goodwill to $3.68 billion.

Frequently Asked Questions

Sales growth was driven by a combination of factors: organic growth from existing businesses (12.5%), significant contributions from acquisitions (12%), and favorable currency translation effects (4.5%). The Process/Environmental Controls segment, in particular, showed strong growth due to acquisitions and robust performance in key areas like environmental and motion businesses.

Danaher completed four acquisitions in the quarter for approximately $814 million, significantly increasing its goodwill by $626 million. The most notable was the acquisition of Radiometer for $677 million, which is expected to bolster the new Medical Technology platform. This aggressive acquisition strategy, while driving growth, also represented the most significant use of cash during the period.

Management expressed a positive but guarded outlook for the remainder of 2004, expecting the strength seen in late 2003 and Q1 2004 to continue. They anticipate continued growth driven by acquisitions and existing businesses, with an expectation of a declining effective tax rate. However, potential risks include increasing competition, currency fluctuations, and economic uncertainties in key markets.

Danaher generated strong operating cash flow of $251.9 million in Q1 2004, an increase of 17.5% year-over-year. Despite significant cash outflows for acquisitions, the company maintained a healthy cash balance of $642 million. Future cash requirements for working capital, capital expenditures, acquisitions (including the pending KaVo acquisition), and dividends are expected to be met through internally generated funds, available cash, and potentially through debt financing or commercial paper programs.